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Green illusions and the carbon tax

By Tim Anderson

April 30, 2011 -- The
proposal for a carbon tax raises the issues of tax equity and political
strategy. Yet despite their inter-relatedness, we need to disentangle
these issues to focus on the original question. As a mean
of addressing climate change, the carbon tax proposal comes in the context
of difficult global negotiations, where almost any proposal has been
seen as a breakthrough, and where (after the last financial derivatives
bubble) there is justified suspicion of emissions trading schemes.

In
Australia the political context includes a narrow, two-party debate
which has reverted to tax incidence, with both major parties basically
captured by the major investor groups and Labor having recently been
humiliated over a failed proposal for a new mining tax. Into this mix we
have the Greens, presenting as an alternative, yet signing an accord
with the Labor government over its carbon tax.

I would
like to briefly touch on the tax equity issue, before moving to the
carbon tax and then to the question of political strategies.

Tax equity

Back
in the 1970s Labor MP Jim Cairns commented that the question was not
how much tax big companies paid, but whether they paid any tax at all.
The situation is hardly better today. Underlying this is a failure of
political will on the part of successive governments. Neither major
party wants a confrontation with the big investment groups.

Yet
there is natural, popular resentment at the incidence of new taxes on
wage earners and consumers, and it is similarly natural that themes like "make the polluters/companies pay" are raised.

However it
is hard to imagine that this chronic problem might be addressed simply
as a "side issue" to the primary aim of the carbon tax -- to create some
sort of vehicle for the reduction of carbon emissions. If the Labor government was
unable to directly impose a very reasonable super-profits tax on the
mining companies, it seems less likely to be able to make big companies
wear (and not pass on) a new tax simply as the "by-product" of an
environmental protection policy.

Carbon tax and climate change policy

In
the euphoria of overcoming the blockade on the Kyoto Protocol by
Washington (and therefore also by Canberra) we may have lost sight of
what that agreement represented. Yes, it meant accepting and addressing
the fact of human-aggravated climate change by carbon emissions -- but it
also represented a "market mechanism" to deal with the problem. It
particular it proposed emissions trading.

Even the Australian Greens,
in the midst of their other quite reasonable policies on climate change
(public investment in renewables, removing subsidies for coal
companies, new standards and regulation in favour of sustainable
industries), include reference to “market-based” mechanisms.

What
is meant by "market mechanism"? It is a neoliberal concept, in the
sense that it pre-supposes that pathways to ecological integrity can be
found through private commercial transactions, making use of "price
signals". It assumes, and therefore demands, that there can be no real
conflict of interest between private commerce and public policy. If only
the "right" price signals are built into transactions, incorporating
more closely the full costs of production, private markets will "correct" their previous distortions. Carrying on with business as usual
(i.e. commodification and profit making) after a simple price
adjustment is thus said to be the best way for the planet to go green.

Based
on this logic, a designated price for carbon is central, and underlies a
carbon tax as well as an emissions trading scheme. Both pretend to set
up "market mechanisms" which create higher prices for "dirty"
industries, supposedly driving investment into better alternatives. The
carbon tax proposal differs a little, in that it pretends to build
public revenue to assist the process and stops short of a "market price"
for carbon; but there is no great conceptual difference between the
two. Indeed, the "Multi-Party Climate Change Committee" agreement
between Labor, the Greens and some independent MPs, asserts that the "carbon price mechanism" will roll out for some years "before converting
to a cap and trade emissions trading scheme".

The
problems with this line of logic should be obvious. The demand for
carbon-dirty industries is mostly "price inelastic" and so the higher
costs will be accepted, and passed on to consumers without technological
change. Australia has had very high taxes on petrol since the late
1970s, with no real impact on fuel consumption. Second, there is no
guarantee that revenue from a carbon tax will be used to invest in
renewable energies; indeed the more recent debate has degenerated into one where
most revenue is said to be used in "compensation" for affected
industries and consumers. While potentially worthy in the sense of tax
equity, "compensation" negates the supposed behavioural impact of higher
carbon prices.

Finally, the "emissions trading scheme"
towards which this is all heading is certain to be a sorry collection
of unfulfilled promises, evasions and scams. Companies will be
encouraged to buy their way out of their liabilities, instead of being
required to change their technologies. They will finance shonky and
unaccountable nature conservation projects in other countries. These
projects in turn will be purchased by the next wave of loggers and
miners. Liabilities will be onsold into a new derivatives bubble market,
and we very recently saw the consequences of such bubbles.

Green political strategies

Meanwhile,
some in the Greens seem to think that the carbon tax agreement
represents a new era in responsibility and maturity. Some even accuse
the Liberal Party -- through its opposition to the tax -- of "scaring the
business community".

One activist on a Greens blog says, "We need to find a way to align ourselves with our potential friends.
Let’s start talking to BHP and Westpac." "Great point", the blog host
replies. In my view, this sort of naivety spells great danger for the
Greens.

The "market mechanism" minority part of the Greens'
climate change policy has rapidly come to dominate the party's other
policies. The Greens are now deeply implicated in a neoliberal agenda and
(along with Labor) will be blamed for its failure. When the "carbon
bubble" collapses they could share the fate of the Irish Greens, or the
Australian Democrats.

The simple alternative would be to
reject the talk of "market mechanisms" and pursue measures that directly
address both carbon emissions and technological change towards
sustainable industries: public investment in renewables, removing
subsidies for coal companies, and new standards and regulation in favour of
sustainable industries.

Better to promote an honest alternative than help administer this latest scam.